Stella International (1836) H1 2024 earnings summary

Executive summary

• Revenue rose 7.5% year-over-year to US$770m for 1H2024, with shipment volume up 12.3% to 26.5m pairs, led by Sports category growth and early shipments.

• Operating profit increased 52.9% to US$99.1m, with operating margin at 12.9% (up from 9.0%), ahead of the 2025 target, driven by improved customer mix and efficiency.

• Adjusted net profit surged 54.1% to US$92.9m, with net profit at US$91.5m, and basic EPS up to 11.5 US cents.

• Gross profit margin improved by 2.7 percentage points to 25.8%, and net cash position reached US$326.1m.

• Board plans to return up to US$180m to shareholders over 2024–2026 via buybacks and special dividends, with interim dividend of HK65 cents per share and payout ratio of 71.5%.

Financial highlights

• Gross profit rose 20% to US$198.9m, with gross margin at 25.8% and adjusted net profit margin at 12.1% for 1H2024.

• Cash and cash equivalents rose to US$334.6m, up 92.9% year-over-year; net gearing ratio improved to -29.6%.

• Net cash inflow from operations was US$99.2m, with net cash outflow from investing activities at US$15.7m.

• Dividend yield for the last 12 months was 9.4%, with a total yield (including buybacks/special dividends) targeted at 13.7%.

• Book value per share increased to HK$10.6; capital expenditure for the period was US$23.8m.

Outlook and guidance

• Full-year 2024 operating margin expected to be maintained or expanded, with shipment volume growth led by Sports category.

• Non-Sports facilities to operate near full utilisation; new Indonesia and Bangladesh factories to ramp up.

• Full-year ASP expected to remain stable due to higher Sports product mix.

• Board committed to a 70% dividend payout ratio and additional cash returns up to US$60m per year for 2024–2026.